Protection for banker bonuses shows we have a short memory

The government is arguing against new rules for a cap on bank bonuses

Just seven short years ago British banks brought the UK to its knees, forcing bailouts that the man on the street is still feeling today as the government cuts spending to try and rebalance its books.

While this may be fresh in many of our minds, the politicians seem to have forgotten just how badly the banks behaved and are currently challenging the bank bonus cap that the EU is trying to enforce.

Speaking in the House of Commons last week, economic secretary to the Treasury Andrea Leadsom argued that the European cap would 'undermine the progress that we have made to make sure that bankers' pay is aligned with long-term performance and that there are no rewards for failure or wrongdoing'.

This is all well and good but why not impose a bonus cap as well? The fact is the measures that the coalition has introduced impact banks' balance sheets rather than bankers themselves.

Leadsom said the coalitions bank bonus tax will bring in £8 billion over the lifetime of this Parliament and up to £18 billion by 2018. It's a large sum of money but frankly a drop in the ocean for banks and furthermore doesn't set out to individual bankers that they will be held personally, financially responsible for the mess they got this country into.

It seems bankers have even shorter memories considering the scandals that have emerged post-crisis, including Libor rate rigging and widespread mis-selling. Bonuses should be capped because it may remind the bankers that their actions have a wider impact.

Young hit hardest

Personally I believe, like Labour MP Nick Smith, that a bank bonus cap coupled with the banker tax could go a long way to creating jobs for young people. The 'millenials' have arguably been the real losers from the crisis – whereas pensioners have seen their benefits ring-fenced, young people have seen university fees hiked and housing benefit for under-25s cut.

In the last four decades the number of young people aged 21 to 30 who are in low paid jobs has more than tripled – with three in 10 young people in low paid jobs, according to think-tank Resolution Foundation.

On the flip side we have seen business as usual at the banks – Lloyds boss Antonio Horta-Osorio received a £1.7 million pay out earlier this year, most of which was received in company shares.

We may all be feeling the hangover from the financial crisis but it seems those who caused it will continue to profit.